Warrnambool surprises with $16 million profit increase for first half

Warrnambool Cheese and Butter (WCB) has announced a half year net statutory operating profit after tax of $31.3 million, an increase of $16 million or 104.7 per cent compared with the same period last year.

Included in the statutory profit were material items totalling $5.2 million after tax. The material items after tax included $2.1 million of takeover defence costs associated with takeover bids received by WCB during the six months to 31 December 2013 and $3.1 million associated with a change in accounting estimates of internal by-product transfer pricing.

The underlying profit after income tax attributable to shareholders was $36.5 million, an increase of $21.2 million or 139.1 per cent over the previous corresponding period.

“As indicated in our December guidance, the improved market conditions experienced in the last quarter of the 2013 financial year have continued into the 2014 financial year,” said David Lord, WCB CEO. “Despite the distraction with the takeover process, WCB has maintained its focus on maximising returns and the implementation of its strategic business initiatives,” he said.

During the six months to 31 December 2013, WCB was the target of takeover bids from Bega Cheese Limited, the Murray Goulburn Co-operative and Saputo Dairy Australia. As at 7pm on 12 February 2014, Saputo was successful in achieving 87.92 per cent of voting power in WCB.

“Although the takeover process was lengthy and well publicised, the bids for WCB have realised an excellent premium for WCB shareholders,” said Terry Richardson, WCB Chairman. “The WCB Board believes Saputo’s offer has been in the best interest of shareholders and other business stakeholders,” he said.

Outlook for full 2014 financial year

WCB reported the outlook for the full 2014 financial years remained positive. International commodity demand remained strong, supporting improved commodity pricing and the Australian dollar has depreciated from the highs of the 2013 financial year.

Overall debt has decreased by 4.6 per cent of $3.4 million in the six months to 31 December 2013. WCB said this reflected the positive cash flow from operations partially offset by the investment in a new Lactoferin plant commissioned in January 2014.

No interim dividend has been declared as the Director foresee cash being retained for reinvestment into the business for growth, investment and development.

WCB’s Board said it should be noted that WCB’s half-year profit result “does not normally reflect the expected proportional full year result of the Company”. Due to industry and seasonal factors, it is normal for the half-year operating results to exceed those of the full year. During the second half of the financial year, WCB may be subject to:

increases in milk prices that are retrospective from 1 July 2014 and cannot be accurately estimated as at 31 December 2013

seasonal milk flow variations that result in less effective utilisation of plant

variations in international commodity pricing

foreign exchange rates between the US dollar and Australian dollar, as approximately 60 per cent of the Company’s product is exported